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IDEL is NOT a Layoff or Constructive Dismissal: Ontario Court Changes Course

The COVID-19 pandemic has obviously impacted and impeded the way in which businesses can operate.  More specifically, through various lockdowns and mandatory closures for workplaces not deemed “essential”, the pandemic has not only impeded businesses, it has prohibited some businesses from operating.  And if we understand employment to be, in essence, a contract in which one party (the employee) provides services to another party (the employer) in exchange for compensation, well the lockdown measures have basically made employment prohibited for some people.

The normal result of employment ending, or the contract being breached through no fault of the employee, is damages by way of notice of termination or pay in lieu thereof.  The Ontario government attempted to solve that problem last year when it introduced the Infectious Disease Emergency Leave, whereby an employee whose hours of work are reduced or eliminated due to COVID-19 reasons is deemed to be on a job-protected leave of absence, not a layoff or termination.  Our most recent blog on the IDEL can be reviewed here.

However, many employment lawyers pointed out that the IDEL was a provision under the Employment Standards Act, 2000 in Ontario, and it’s Regulations, which did not necessarily affect employees’ common law rights.  And so, back in April the Employers’ Edge blog wrote about an Ontario Court decision ruling that an employee who was purportedly placed on IDEL had in fact been terminated, and was entitled to common law damages for wrongful dismissal.  You can review that informative article here.  From a legal perspective, and assuming the facts were found as represented in the decision, the reasoning was … reasonable.  But it certainly left a bad taste in the mouth of employers who have been essentially prohibited from employing their workers.

Another Ontario Court decision has thankfully come to a different outcome in similar circumstances.  In the yet to be released decision Taylor v. Hanley Hospitality Inc., the plaintiff was employed at a franchise location Tim Horton’s restaurant.  On March 27, 2020 after the Ontario government declared a state of emergency and ordered non-essential workplaces closed, she was placed on a temporary layoff.  On August 18, 2020 she was notified in writing that she would be returned to work effective September 3, 2020, and apparently she continues in employment with the Defendant.

Notwithstanding all of that, the employee brought a claim for wrongful dismissal against her employer on the basis that it did not have a contractual right to place her on layoff.  In normal circumstances, an employee whose contract of employment does not contain an explicit term allowing the employer to place them on temporary layoff, can claim to have been constructively dismissed from their employment, and seek common law damages.  This is so even if the employer has complied with the provisions of the Employment Standards Act that deem a temporary layoff NOT to constitute a termination of employment – note that the one Ontario case that decided otherwise has been rejected in subsequent decisions.

As for Ms. Taylor, a motions judge determined that as a matter of statutory interpretation, her claim should be dismissed because the amendments to the ESA and implementation of the IDEL Regulation clearly placed her on a job protected leave of absence and deprived her of the ability to claim to have been constructively dismissed.  The Court ruled in part:

[12] Ms. Taylor claims that her temporary layoff is a constructive dismissal and that her employment has been terminated. Essentially her argument is that the Employment Standards Act, 2000, SO 2000, c.41 (the “ESA”) and Ontario Regulation 228/20, does not displace the common law doctrine that a layoff is a constructive dismissal. I do not agree in these times of COVID-19.

That certainly seems like the right outcome, but the case, which was only released on June 7, 2021, has already faced intense criticism in its reasoning.  Critics of the decision point to the facts that the provision that an IDEL is not a constructive dismissal is contained in a Regulation and has not actually been legislated into statute to displace the common law.  That means that the Court’s reasoning, in part that:

The employee cannot be on a leave of absence for ESA purposes and yet terminated by constructive dismissal for common law purposes. That is an absurd result.

flies in the face of current jurisprudence – particularly when you consider that a layoff compliant with the ESA can still be a common law termination of employment.

The Lawyers for Employers at CCPartners understand that Ms. Taylor and her counsel will be appealing this decision, but in my respectful view, even though some of the legal reasoning can be legitimately questioned, the ultimate result should not change.

Even if the Regulation did not change the common law (the Court found that it did, by the way), the Court properly reminded us all that “the common law evolves as the changing times make it necessary to do so”.

The Court also listed a number of elements that it identified as the true context of the Plaintiff’s layoff:

(xiii) it is essential that the court remember the context of IDEL and the Regulation:

1. the legislature created the “problem” when it triggered the state of emergency and required employers to cease or curtail their operations.
2. the legislature forced employers to lay off employees or reduce their hours;
3. in doing so, the legislature exposed the employers to claims of common law constructive dismissal;
4. to avoid those consequences, the legislature amended the ESA to create IDEL and created the Regulation;
5. the legislature solved the very problem that it had created and took away that exposure that arose from its own action;
6. it should be obvious to the world what the legislature’s intention was by doing so.

Ultimately it seems that the Court favoured a common sense approach to its reasoning over a strictly legalistic one:

[22] I agree with Tim Hortons that exceptional situations call for exceptional measures. The Ontario Government recognized the inherent unfairness in subjecting employers to wrongful dismissal claims as a result of the government imposing a state of emergency. If they did not take action, these claims would only serve to make the economic crisis from the pandemic even worse. It is just common sense. The plaintiff’s action is dismissed.

This is what the common law is for.  The common law is made by judges based on the circumstances in each case and guided by the jurisprudence that came before it.  But the circumstances before COVID-19 are not the circumstances of COVID-19.  It is simply not fair or reasonable to hold employers responsible for wrongful dismissal damages to their employees whose employment has been prohibited by the government.  Doing so would put employers in an impossible situation of deciding between honouring an employment contract and abiding by public health guidelines and orders issued under a State of Emergency.

Undoubtedly more COVID-19 IDEL constructive dismissal claims will be coming in Ontario, and CCPartners will be sure to keep you updated on developments in the law through our Employers’ Edge blog, and the Lawyers for Employers webinar and podcasts series.  And if you need help navigating these tricky workplace law issues, be sure to reach out to your professional at CCPartners for guidance.